BUDGET GAP. Fitch Solutions Country Risk and Industry Research has revised upwards its 2022 budget deficit forecast for the Philippines for 2022 given the need for higher fiscal spending. It, however, slashed its 2023 budget gap forecast on expectations for the continued improvement in revenue collections. (PNA file photo)

MANILA – Fitch Solutions Country Risk and Industry Research has revised upwards its budget deficit forecasts for the Philippines for this and next year after noting higher fiscal spending and improvement in revenue collections.

In a report dated Oct. 6 released on Friday, the credit intelligence firm now sees higher share for the government’s budget gap this year, accounting for around 7.6 percent of gross domestic product (GDP) from 7.5 percent previously.

It, however, revised down its 2023 budget deficit forecast to 6 percent of GDP from 6.1 percent.

“Despite an increase in fiscal spending, we still believe that the Philippines remains on track for gradual fiscal consolidation over the coming years due to strong revenue growth,” it said.

Its 2022 budget gap forecast is the same as the government’s target while the 2023 projection is lower than the government’s 6.1 percent target.

It expects revenues to grow by 10 percent year-on-year next year “on the back of extensive tax reforms and a robust economic backdrop.”

“The array of tax reforms under the comprehensive tax reform program has helped boost revenue growth considerably since its inception, and we will likely see the continued impact of it moving forward,” the report said.

It also expects additional fiscal reforms “given the increase in fiscal spending.”

“This is further substantiated by President (Ferdinand) Marcos (Jr.) in his SONA (State of the Nation Address), highlighting that ‘tax administration reforms will be in place to increase revenue collection’,” it added.

The report said the government’s fiscal consolidation plan “is positive for debt sustainability.”

The current administration intends to bring down the share of budget deficit to GDP ratio, which surged to 8.4 percent of GDP, to 3 percent of total domestic output by 2023.

The rise in the budget deficit was due to higher spending and lower revenues, both of which was due mainly to the impact of the virus-induced pandemic.

Also, Fitch Solutions forecasts debt-to-GDP to rise to 61.1 percent next year before declining in the succeeding years. (PNA)